Fitch Assigns Mercury General Corp.'A+' L-T Issuer And Debt Rtg

    CHICAGO--July 27, 2001--Fitch has assigned an 'A+' long-term issuer rating to Mercury General Corp. (Mercury), and a preliminary 'A+' senior debt rating to Mercury's recently announced proposed debt offering. The Rating Outlook is Stable.
    The strong rating is supported by Mercury's excellent track record of superior underwriting results, consistent profitability and significant presence as a leading writer of automobile insurance in the California independent agency market. Additionally, the company has a strong balance sheet as exhibited by very strong capitalization, low financial leverage and a high quality, fixed income portfolio.
    Fitch believes Mercury has demonstrated a competitive advantage through conservative underwriting practices and expense control resulting in combined ratios which have consistently outperformed the average personal line writer of automobile insurance. A key driver in this success has been the company's strong relationship with its distribution channel of over 2,000 independent agents.
    Fitch's concerns include Mercury's geographical concentration with approximately 90% of net written premium in the state of California, as well as a concentration in product lines with approximately 90% of 2000 net written premium in personal lines automobile business. While Mercury has historically demonstrated solid results in the competitive and sometimes volatile California marketplace, Fitch believes that the company has potential risk exposures to political or legislative events that would not be present in a more diversified operation. Other concerns include a moderate exposure to interest rate risk caused by its longer than average duration bond portfolio.
    Mercury General Corp. is the holding company for the Mercury Casualty group of insurance companies, which write all classes of personal automobile insurance in the state of California. Mercury is ranked as the sixth largest automobile writer in California and a top twenty-five personal lines automobile writer on a national basis. Mercury also offers homeowners, commercial auto and mechanical breakdown coverages and writes business in six other states.
    As of March 31, 2001, Mercury General Corp. had $2.1 billion of total assets and $1.0 billion in shareholders equity on a GAAP basis and $1.0 billion in combined statutory surplus.
    Fitch expects Mercury's combined ratio for 2001 will continue to be under pressure due to rising loss costs and will remain at less than historical levels until rate relief is granted in its primary markets. Fixed charge coverage is expected to be strong at 10 to 12 times, and financial leverage is expected to be low and not exceed 15% at year-end 2001.

Entity/Issue/Type            Action     Rating/Outlook
Mercury General Corp.
--Long-term rating          Assigned    'A+'/Stable;
--Senior debt rating        Assigned    'A+'/Stable.